The crypto community and Wall Street gathered in Nassau, Bahamas last week to discuss the future of digital assets during SALT’s Crypto Bahamas conference. The SkyBridge Alternatives Conference (SALT) was also co-hosted this year by FTX, Sam Bankman-Fried’s cryptocurrency exchange.
Anthony Scaramucci, founder of hedge fund SkyBridge Capital, opened Crypto Bahamas with a press conference, explaining that the goal behind the event is to merge traditional finance with the crypto community:
“Crypto Bahamas combines the crypto-native FTX audience with the SkyBridge wealth management firm audience. We are bringing these two worlds together to create a fairer financial system.”
Traditional finance watches crypto as regulations take shape
Indeed, the combination of traditional financial institutions with crypto natives was one of the most notable and eye-catching aspects of Crypto Bahamas (a number of men and women wore suits, while some wore shorts and flip-flops). For example, Kevin O’Leary – the Canadian entrepreneur better known as “Mr. Wonderful” for his role on Shark Tank – told Cointelegraph that attending the Crypto Bahamas emerged as the most important aspect:
“We have governments from all over the world here, along with institutional investors who don’t actually own cryptocurrency but are watching the dynamics in politics. They begin to realize that a big change is coming.”
According to O’Leary, the recent regulatory framework for crypto by US Senator Kirsten Gillibrand and Senator Cynthia Lummis, along with the Stablecoin Transparency Act proposed on March 31, 2022 by Rep. Trey Hollingsworth and Senator Bill Hagerty, are now sparking institutional interest in crypto .
“They have concluded that this is an asset class that is here to stay,” O’Leary noted. While that may be the case, he noted that many traditional financial institutions still do not own cryptocurrency and will not own digital assets until the directive is implemented. “I think cryptocurrency will become the 12th sector of the S&P. We pay 20-30% more when institutions start indexing. That is the big debate going on at this conference.”
While some members of the crypto community may find institutional players intrusive, Henri Arslanian, Senior Crypto Advisor at PwC, told Cointelegraph during the conference that the crypto ecosystem should welcome the entry of institutions, noting that they are centralized Actors have the maturity and experience needed to work with institutional investors. “This can be beneficial for the entire crypto ecosystem,” Arslanian said.
Scaramucci further told Cointelegraph that crypto is still in its infancy, but he predicts the market will see major innovations over the next five years. “Long term I am excited to see where this is going, but short term we will see headwinds from post-COVID-19, the war between Russia and Ukraine, the specter of inflation and supply chain issues. ‘ he remarked. Scaramucci added that he believes FTX will be the most transformative player in the space overall because “their mission is to transform the entire financial ecosystem by tokenizing all markets.”
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If you build it, they will come
Meanwhile, it looks like the Bahamas is likely to become the world’s next crypto hotspot. While FTX moved its headquarters from Hong Kong to the Bahamas in September 2021, other crypto companies are expected to do the same. Bahamas Prime Minister Philip Davis told Cointelegraph that the country has a regulatory regime and recently released a policy whitepaper framework to help crypto companies understand how to operate in the country:
“This will help companies understand how to grow and thrive and what we can expect from them. The policy also addresses concerns people have about cryptocurrency and the risks associated with digital assets. The policy is being implemented to protect consumers and the integrity of the space while ensuring we minimize any risks that may pose to businesses here.”
Scaramucci said he believes the Bahamas is becoming a crypto-centric region that will be known as one of the “most forward-thinking and economically visionary countries” in the next five years. Arslanian added that crypto-friendly jurisdictions in regions like the Bahamas and Dubai have the opportunity to become global hubs by attracting powerful crypto companies. “These jurisdictions are clearly focused on the future of crypto,” he said. On the other hand, Arslanian pointed out that the US still lacks regulatory clarity when it comes to cryptocurrency innovation:
“Prior to this interview, I moderated a panel with Chris Giancarlo, former Chairman of the US Commodity Futures Trading Commission. I asked him how he would rate crypto regulation in the US on a scale of zero to 10 and he answered zero. Jurisdictions have the agility, but they also need the will to embrace crypto.”
In terms of understanding how the US could improve crypto regulation in the future, Arslanian explained that models in Dubai such as the newly formed Dubai Virtual Asset Regulatory Authority (VARA) could help other regions to implement.
“VARA is a specialized crypto regulator, so they know this industry very well. We need more regulators specializing in this policy in other regions.” While VARA is a recent innovation, in March this year FTX expanded its operations in the United Arab Emirates by obtaining a virtual asset exchange license in Dubai, granted under VARA.
Crypto Is Going Through “Regulatory Madness” But The Future Looks Bright
Overall, regulatory developments in the cryptocurrency sector were extensively discussed at the Crypto Bahamas. For example, stablecoins and central bank digital currencies (CBDCs) have been a hot topic of discussion.
Sheila Warren, CEO of the Crypto Council for Innovation, moderated a panel entitled “DeFi Future: Inside the Making of a New Financial System.” Warren told Cointelegraph that the next two to three years will define the evolution of Web3 and blockchain technology for generations to come, given the innovations currently taking place in the crypto sector.
“The biggest threat, but also the biggest opportunity for crypto right now is in the area of policy making. We now have evidence and hard data to show how technology can achieve public policy goals that we all agree are important to society,” she said.
Regarding stablecoins and CBDCs, Warren explained that both play a role within financial systems based on different use cases. “CBDCs can make sense in a closed financial system, but for the most part I remain skeptical about CBDCs going beyond interbank settlements and cross-border payments.” In contrast, Warren believes stablecoins have tremendous potential when it comes to being programmable money to be used. She said:
“There is a role for stablecoins that is critical. For example, I think USD Coin is one of the most important innovations that we are currently seeing in the ecosystem in terms of the bridge it can provide between different assets while also enabling programmability in smart contracts. I’m bullish on stablecoins, but I want to see how the regulatory environment treats them – it’s important for our entire ecosystem.”
O’Leary believes that the first crypto-friendly policy passed in the US will focus on stablecoins. He believes this will be the case due to the Stablecoin Transparency Act introduced earlier this year, which aims to scrutinize stablecoins on a 30-day cycle.
“This is similar to the money market accounts that Fidelity and Schwab have, so they are looking at this as a way to make stablecoins more transparent. Let’s assume USDC is the first stablecoin to get this license – others will do the same soon,” O’Leary said.
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He added that such regulations could transform the traditional financial space. “In FX trading, for example, I am currently being overwhelmed by fees as I have to exchange US dollars for euros or British pounds when buying European stocks. But if there were a stablecoin, there would be more transparency, less friction, and it would be auditable. I was able to transfer money in seconds,” he explained.
O’Leary further noted that the stablecoin regulatory legislation is likely to come into effect after the US midterm elections, which are scheduled to take place on November 8th of this year. “There will be a leadership change,” O’Leary said. Warren added that the crypto sector is currently experiencing “regulatory madness,” noting that there isn’t a single jurisdiction right now that isn’t focused on crypto innovation: “This is the most important effort of our time. We are currently laying the foundation for the further development of crypto.”
To put this in perspective, Scaramucci told Cointelegraph that retirement plan provider Fidelity Investments, which is announcing the ability for 401(k) retirement savings account holders to invest in Bitcoin (BTC), is a seismic event in terms of pushing crypto regulation is. “I predict that Fidelity will do for bitcoin and possibly other cryptos what it did for the US stock market in the 80s and early 90s. Fidelity has $2.4 trillion in retirement accounts under custody, so just imagine if a small portion of that went into bitcoin.”
Scaramucci also announced that SkyBridge will soon offer its employees a bitcoin retirement option plan. However, he pointed out that a Bitcoin exchange-traded fund (ETF) in the US is currently the biggest elephant in the room. “I hope that by the end of this year we will see a bitcoin cash offering. When this happens, all major financial services companies will be forced to develop a bitcoin cash offering.”
https://cointelegraph.com/news/crypto-bahamas-regulations-enter-critical-stage-as-gov-t-shows-interest The regulations are entering the critical phase as the government shows no interest